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Financial planning is a marathon, not a sprint
You wouldn't expect to become a world class athlete without putting in training, and building up financial health is no different.
by Michelle McGagh on Nov 27, 2012 at 15:40
Are your finances in rude health, or a little bit out of shape? The chances are that it’s the latter, but you won’t be able to sprint to the finish line of financial health without putting in some training first.
Jason Witcombe, director of London-based independent financial advice firm Evolve Financial Planning, is a keen runner and likened financial planning to the sport.
‘You do not start a marathon without knowing what pace you need to run at and financial planning is a marathon and then some,’ he said.
Witcombe said in order to sort out your finances you need to start ‘with a blank sheet of A4’.
‘Get a sheet of A4 paper and write on it your assets, liabilities, income and expenditure. Then write down all the things that you and your family would like to achieve, then prioritise those,’ he said.
‘If you know where you are and where you want to go, then you are half way [to sorting out your finances].’
Working out what money you have and where you want to use it lets you set the ‘pace’ for your savings to ensure you save enough to achieve the things that you want to do.
Getting to the start line
Witcombe said most people put off financial planning because ‘it is too complex and they have not got enough time’ and admitted that ‘for most people it is dull’.
A financial planner, however, can act as a fitness coach (to remain with the sporting analogy) who can motivate you to hit your financial goals.
‘Our job as financial planners is to motivate clients and help them understand their finances and the benefits of saving,’ he said.
‘There is a lot of jargon, which doesn’t inspire people and is not easy to read – but we are here to cut through the nonsense.’
If your finances are the fitness equivalent of a coach potato, don’t worry, Witcombe said you have nothing to be embarrassed about.
‘Understand that most people are confused because there is so much choice and information overload – you shouldn’t be embarrassed about not knowing,’ he said.
Commit to training
For those that do take the leap into financial planning, they must realise that there is no quick fix; just as there is no way to lose a stone overnight, there is no way to make a quick buck and that you have to take risk and invest for the long-term to achieve a good return.
‘People are led to believe that risk and reward do not go hand-in-hand when they do. Risk in the long run should reward you,’ said Witcombe.
‘Mis-selling scandals are all about trying to convince people they can make a quick buck and that is what eventually blows up. I guess it’s human emotion that we want to believe it is easy to make a fast buck but remembers, if it’s too good to be true then it probably is.’
Financial Planning Week runs from 26 November to 2 December and is organised by the Institute of Financial Planning to raise awareness of the profession and help consumers make the most out of their money. You can find out more here.
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by Michelle McGagh on Jan 29, 2015 at 12:55